What are the costs to start and maintain a vape shop?

You should be able to start a vape shop with a budget of around $25,000 to $50,000. If you are considering opening a franchise, you will likely need more. All in all, you will need to: Acquire a lease in a suitable location Purchase e-cigarette kits and other accessories Get an iPad or work computer and Point of Sale software Visit our How to Start a Vape Shop guide to learn more about the costs of starting and maintaining this business.

Should I Start an LLC for My Vape Shop?

Starting a limited liability company (LLC) for your vape shop can provide several benefits.

Most importantly, an LLC structure offers limited liability to its owners, which can protect their personal assets from lawsuits and creditors.

For a vape shop, lawsuits can arise from things like selling malfunctioning vapes, a customer claiming that they got ill after vaping, and accruing unpaid business debt as a result of not paying your shop’s lease on time.

LLCs are also affordable, highly flexible (from a tax point-of-view), and can make your vape shop seem more credible.

Recommended: Use Northwest to form an LLC for $29 (plus state fees).

person holding and smoking a vape pen creating a vape cloud

Do I Need an LLC for a Vape Shop?

LLCs are a simple and inexpensive way to protect your personal assets and save money on taxes.

You should form an LLC when there's any risk involved in your business and/or when your business could benefit from tax options and increased credibility.

LLC Benefits for a Vape Shop

By starting an LLC for your vape shop, you can:

Protect your savings, car, and house with limited liability protection
Have more tax benefits and options
Increase your business’s credibility

Limited Liability Protection

LLCs provide limited liability protection. This means your personal assets (e.g., car, house, bank account) are protected in the event your business is sued or if it defaults on a debt.

Vape shops will benefit from liability protection because of the risk of product liability and workplace injuries.

Example 1: After ignoring an FDA warning about one of your products, you find out that your business is being sued. If it happens to accrue significant debt as a result, your personal assets will remain out of bounds to the claimants as a result of your limited liability in law.

Example 2: When a customer’s child gets ill after purchasing (and using) a vape from your store, they file a lawsuit against your LLC, demanding compensation. Regardless of how the claim progresses in court, you will not need to personally compensate the claiming party as long as your vape shop is registered as an LLC.

Example 3: While carrying a large box of new vapes, one of your employees accidentally smashes on a mirror, breaking it and suffering small cut wounds on their upper body. When you refuse to offer any sort of compensation and terminate the employee’s contract, a medical damages lawsuit is filed against your vape shop business. Since you benefit from the limited liability protection of an LLC, you will not need to use your personal assets to compensate the claimant, even if your business is unable to.

An LLC will also protect your personal assets in the event of commercial bankruptcy or loan default.

To maintain your LLC's limited liability protection, you must maintain your LLC's corporate veil.

LLC Tax Benefits and Options for a Vape Shop

LLCs, by default, are taxed as a pass-through entity, just like a sole proprietorship or partnership. This means that the business's net income passes through to the owner's individual tax return.

The business’s net income is then subject to income taxes (based on the owner's tax bracket) and self-employment taxes.

Sole proprietorships and partnerships are taxed in a similar way to LLCs, but they do not offer limited liability protection or other tax options.

S Corp Option for LLCs

An S corporation (S corp) is an IRS tax status that an LLC can elect. S corp status allows business owners to be treated as employees of the business (for tax purposes).

S corp tax status can reduce self-employment taxes and will allow business owners to contribute pre-tax dollars to 401k or health insurance premiums.

The S corp status requires that the business pay the employee-owner(s) a reasonable salary for the work they perform.

In addition, the business might need to spend more on accounting, bookkeeping, and payroll services. To offset these costs, you'd need to be saving about $2,000 a year on taxes.

We estimate that if a vape shop owner can pay themselves a reasonable salary and at least $10,000 in distributions each year, they could benefit from S corp status.

You can start an S corp when you form your LLC. Our How to Start an S Corp guide will lead you through the process.

Credibility and Consumer Trust

Vape shops rely on consumer trust. Credibility plays a key role in creating and maintaining any business.

Businesses gain consumer trust simply by forming an LLC.

A growing business can also benefit from the credibility of an LLC when applying for small business loans, grants, and credit.

Northwest will start an LLC for you for just $29 (plus state fees).

Get Started

How to Form an LLC

Forming an LLC is easy. There are two options for forming your LLC:

You can hire a professional LLC formation service to set up your LLC for a small fee
Or, you can choose your state from the list below to start an LLC yourself

Select Your State

For most new business owners, the best state to form an LLC in is the state where you live and where you plan to conduct your business.

Do LLCs Need Insurance?

All businesses need insurance to protect their business assets — even LLCs. This is because the limited liability protection from an LLC protects your personal assets, not your business assets.

Business insurance can protect your vape shop’s assets (e.g., e-cigarettes, accessories, storefront, etc.) from negligence or medical damages lawsuits. It can also help you compensate your employees (if need be).

Common Situations Business Insurance May Cover for a Vape Shop

Example 1: In an effort to reach a product in your store, a customer presses down on a glass display case and shatters it. He sustains deep lacerations that require medical attention. When he demands that you pay for the medical care costs, you can contact your insurer to get the bills covered by your general liability insurance policy.

Example 2: While marketing your company, you put out an advertisement claiming that your vape shop has superior e-cig supplies than the competitors in your area. One of these competitors decides that you have damaged the reputation of his business and takes legal action. Your general liability insurance policy will cover the cost of your legal fees, including the cost of your legal defense and the cost of any settlement.

Example 3: The parent of a customer has determined that your store is responsible for the excessive e-cig use of his son and files a lawsuit against your business. Your legal fees are covered by your general liability insurance, so you don’t have to pay for an attorney to defend your business.

Other Types of Coverage Vape Shops Need

While general liability is the most important type of insurance to have, there are several other forms of coverage you should be aware of. Below are some other types of insurance all vape shops should obtain:

Commercial Property Insurance

With all of the e-cig juice and vaping equipment you carry in your shop, it is important that you carry commercial property insurance. The commercial property insurance policy you purchase will ensure that you can get financial assistance should you sustain a significant loss of inventory in an event like a fire or storm. That way, you can get more inventory as quickly as possible and get back to selling your products.

Product Liability Insurance

You sell a wide variety of products. If one of your customers sustains an injury that he or she blames on your products—like a vape pen or a certain type of e-cig liquid—that customer may sue your shop. Your legal defense costs would be covered by your product liability insurance policy. Should you need to settle out of court, your policy would cover those costs as well.

Workers’ Compensation Insurance

If you have employees in your vape shop, you need workers’ compensation insurance to protect them in the event of a work-related injury. Workers’ comp pays for medical treatment for work-related injuries and work-related illnesses, as well as lost wages, should the employee be unable to work for a period of time. Most states mandate that employers carry workers’ comp coverage, although the exact details of when the insurance is required and what coverage limits are required vary by state.

Commercial Umbrella Insurance

A commercial umbrella policy is designed to pick up extra expenses when the limits of your general liability insurance policy are reached. There are certain situations where this can occur, such as if your business loses a big lawsuit. Instead of needing to pay the extra costs from your own funds, you can rely on commercial umbrella insurance coverage to take care of them.

Should I Start an LLC FAQ

Choosing the right business structure depends on your business’s unique circumstances and needs. However, unless your business is very low risk (like a hobby), an LLC is likely the better option.

Visit our LLC vs. Sole Proprietorship guide to learn more.

At a minimum, you’ll need general liability insurance, workers’ compensation insurance, product liability insurance, and commercial property insurance.

Read our Business Insurance for Vape Shops article for more info.

You should be able to start a vape shop with a budget of around $25,000 to $50,000. If you are considering opening a franchise, you will likely need more.

All in all, you will need to: